Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
If I asked Mike Piper why he considered banning you, do you think he would tell me the truth?
“I do not.
Most likely he would mix partial truths with partial falsehoods.
I’ve seen a lot of that sort of thing over the past 14 years, both from Mike and from others.”
What bloggers would tell the truth about you?
On the day when this story is written up on the front page of the New York Times, every blogger alive, including Mike Piper, will tell the truth about me and about all the rest of it.
I don’t know that one would tell the full truth today. They all are worried about what would happen to them if they did.
How many journalists told the full truth about Scott Armstrong (the biker who was taking performance-enhancing drugs to win his races) before he was exposed? No one dared to do so. Lots of them knew. But Armstrong is a powerful and wealthy and vindictive person. He threatened to sue anyone who told the truth about him and he followed through on his threats in some cases. People lived in fear of him. No one lives in fear of him today. Everyone feels free to speak openly about what he did today.
The same will happen in this case. The Wall Street Con Men are powerful and wealthy people and they have shown a a willingness to engage in unethical behavior if that is what it takes to keep this covered up. But, once it is exposed, lots of people will be telling their stories all at once.
It has to come out. The benefits of exploring the implications of the last 36 years of peer-reviewed research are too great for it not to come out. There’s a lot of money to be made giving millions of people accurate and honest and truly research-based investment advice. People are not going to pass up that money indefinitely. And people are going to want to do something about the economic crisis following the next price crash. The pressure to do something is going to grow too strong to resist.
Given that it has to come out, it is better for every single person involved that it come out quickly. A lot of the people who have done bad things are caught up in something bigger than them. A lot never expected things to get this out of hand. A lot have done good work and made important contributions. They would love to see this ugly stuff brought to an end. All it takes is a few people of courage to make life better in hundreds of different ways for millions of people.
It’s a matter of time, Anonymous. We are close.
My sincere take.
Rob
Anonymous says
Uh oh. I don’t think Jack Bogle will say those words you want to hear. The instead he has doubled down by saying:
“So I was right, really right,” Bogle said.
http://gulfnews.com/business/sectors/markets/vanguard-s-bogle-says-ignore-the-crowd-stick-to-us-stocks-1.2042290
Sorry, Rob. Bogle is not going to do what you want him to do.
Rob says
Bogle has also said that he believes that investors should look to the peer-reviewed research in this field for guidance on how stock investing works, Anonymous. So he says contradictory things.
I believe that The Big Guy will come around in the days following the next price crash. But we will have to wait to see how it all plays out to find out for sure.
My best wishes to you.
Rob
Anonymous says
What peer-reviewed research, outside of Shiller’s paper and Pfau’s paper, have you read and taken into consideration with respect to how stock investing works?
Rob says
Those are the two biggies. I also recall looking at work by Rob Arnott, by Peter Bernstein, by Michael Kitces and by Andrew Smithers. Some of the things that I looked at may not have been peer-reviewed but in all these cases we are talking about material that was published in high-quality publications with tough standards.
And of course there was eight years of in-depth research on safe withdrawal rates and scores of related issues by John Walter Russell. John’s work was not peer-reviewed but it was subject to intense scrutiny by thousands of our fellow community members and every non-Goon agreed it was the highest quality work possible.
There were two long papers on “Bubble Logic” by Cliff Asness that impressed me. They had more of a focus on logic than on data but data was used in support of the logical arguments.
I also was strongly influenced by the book “Stocks for the Long Run,” which makes data-based arguments. That book is firmly rooted in a belief in the Buy-and-Hold model. So I don’t agree with many of the strategic recommendations advanced in the book. But it is possible in some cases to gain a sense of how the recommendations made in that book would be altered if the author (Jeremy Siegel) appreciated the importance of making adjustments for valuations. So I found the material presented in the book helpful in advancing my understanding even though in most cases I wouldn’t feel comfortable citing its results without offering qualifications or caveats.
The single finding that had the biggest impact for me was Wade’s finding that there is not a single study in the literature showing that it is not necessary for investors to practice price discipline (long-term timing). I had heard the claim that “timing doesn’t work” so many times from Buy-and-Holders that I just assumed that there must be at least one study backing it up. There is not. There is the one study that Wade discredited because of its glaring flaws. And outside of that, nothing. Most people who say that timing doesn’t work are thinking that Fama’s work showed that. But the reality is that Fama looked only at short-term timing — he never even attempted to examine whether long-term timing works or not (it was not even possible to practice long-term timing until Bogle founded Vanguard in the mid-1970s and made broad index funds widely available). Wade was ASTOUNDED by that finding. He couldn’t get over it. He was very careful to be sure that he had checked the entire literature because he realized that this finding turned everything we once thought we knew about how stock investing works on its head.
Another thing that has always impressed me is that in 36 years no one has found major problems with Shiller’s work. There are details that people argue over and that is always going to be the case and that is of course appropriate. But given how “revolutionary” (Shiller’s word) Shiller’s findings were, there obviously would be lots and lots of people motivated to find holes in his claims. Yet he was awarded a Nobel prize in 2013, after his critics had had over 30 years to find any significant holes.
Finally, I think it is a big deal that Shiller’s finding has continued to apply on a going-forward basis for 36 years now. The Buy-and-Holders like to suggest that this mountain of research showing that valuations affect long-term returns is the product of data mining. But if it were, there is no reason why it should continue to work on a going-forward basis. Yet here we are 36 years down the road and stocks are still performing in the way that the Valuation-Informed Indexing Model posits that they should perform and not in the way that the Buy-and-Hold Model posits that they should perform. I do not think that that means that the Valuation-Informed Indexers have it all figured out. I very much believe otherwise. But I do think it shows beyond any reasonable doubt whatsoever that the last 36 years of peer-reviewed research is pointing to something important and that we should permit it to be discussed at every investing site on the internet.
I certainly do not mean to leave people out. I understand that there are others who have made important contributions in this area. I am just mentioning off the top of my head the people who had the greatest effect on me personally as I struggled to gain a better understanding of these terribly important matters.
I probably should mention that Rob Arnott’s “Editor’s Notes” column at the Financial Analysts Journal had a big influence on me. A very common phenomenon in this field is that people read the findings of a paper and appreciate them in some very limited way but are not able to appreciate how far reaching the implications of the findings are. People are very cautious in the money area and they want to be 100 percent certain that they get things right before they state something. Arnott had the courage to discuss some very far-reaching and very scary implications in plain language. Reading his work gave me the courage to do the same. I did not speak the way I speak today back in 2002.
I was deeply influenced by the book “Stock Cycles.” That book is heavy on statistical analysis but none of it has gone through a peer-review process.
Finally, I really have to mention the hundreds of thousands of comments by my fellow community members. The comments are not peer-reviewed, to be sure. Far from it! But they serve a similar purpose as a peer-review process. The comments of our fellow community members keep us on the straight and narrow, they identify holes in our thinking, they suggest new directions that need to be explored, they warn of the dangers of over-statements. I have benefited immensely from that sort of feedback, both from my thousands of Buy-and-Hold friends and from my hundreds of Valuation-Informed Indexing friends. Heaven help us all but I have benefited from feedback advanced by my Goon friends (on more than one occasion feedback that appeared in a form very, very, very unlike any that has ever been seen in a peer-review sort of environment!).
I think that it would be fair to say that 100 percent of the peer-reviewed research available to us today shows that valuations affect long-term returns and that 0 percent shows otherwise.
I hope that helps a small bit.
Rob
Anonymous says
So, you cannot say specifically that all research has been consider. Further, this is your interpretation of information, versus the conclusion of a panel of experts. Therefore, how can you still conclude as to what 100% of what the research says, when you have not standard processes for scientific research?
Rob says
Wade Pfau holds a Ph.D. in Economics from Princeton. He searched the entire literature. He was not able to find one study supporting the key Buy-and-Hold claim that investors do not need to practice price discipline when buying stocks. The response of Bogle’s Goon Squad was to threaten to send defamatory e-mails to his employer in an effort to get him fired from his job.
Buy-and-Hold is a scam, Anonymous, the biggest scam ever worked on the people of the United States in the history of our nation. Please give me a freakin’ break.
Rob